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5. Building your new home

Building your own home has the advantage of allowing you to develop the home of your dreams. However, it is a time consuming and complex process involving several parties and a lot of additional paperwork. Most lenders have a specific product geared toward the construction of a home, commonly called a "building home loan".
A building home loan allows for periodic progress payouts at certain points during the building process, as opposed to a normal mortgage which is paid out in full on transfer of the property. This financing structure protects both the bank and the home owner because the building process is subject to periodic bank assessment before further funds are advanced to the builder. Progress payments are made by the bank subject to retention, ensuring that sufficient funds are retained in your account to complete the project.

The decision to build should be underpinned by the following two ground rules:

•  Affordability:
Build within your budget. This will help you avoid the disappointment of starting to build your dream only to be thwarted by lack of funds. Do not allocate your entire budget upfront. Building is a lengthy process so keep funds available for unforeseen costs and inflationary price increases.

•  Use the best suppliers:
Any lucrative market attracts its share of fly-by-night services providers. Property is no exception. Ensure that you hire the best you can afford, from architects and developers, to builders and contractors. Try to establish their qualifications and research their track records upfront, as this will allow you to avoid many potential pitfalls on the long road ahead.

Qualifications:

Along with the standard personal and financial information listed above, the following additional documentation is required to apply for a building loan:
• Provisional plans or working drawings from the architect or builder
• A signed building contract between yourself and the builder/contractor
• Schedule of finishes
• Proof of builder's NHBRC registration

Read property buyer's frequently asked questions

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